Qihoo Leads Biggest Slump in Two Weeks: China Overnight

Chinese equities fell the most in
two weeks, led by Qihoo 360 Technology Co. (QIHU), on concern revenue
growth will slow for the operator of the nation’s second-largest
search engine.

The Bloomberg China-US Equity Index of the most-traded
Chinese equities in the U.S. retreated 1.4 percent to 105.81 as
39 shares declined, 13 gained and three were unchanged. Qihoo
dropped 9.5 percent, paring its rally this year to 164 percent.
Airline stocks trimmed a three-day advance, led by China
Southern Airlines Co. Giant Interactive Group Inc. (GA) jumped to the
highest in five years after receiving a buyout offer.

The China-US gauge posted the longest stretch of gains
since September last week after the government vowed to reshape
state-controlled industries to lure investments. Beijing-based
Qihoo forecast fourth-quarter revenue of as much as $208
million, according to a statement on Nov. 24, below five of the
12 analyst estimates compiled by Bloomberg. Stifel Nicolaus &
Co. downgraded the stock to hold from buy.

“You have tons of momentum built in so you could see some
suggesting that you sell it because revenue growth will
eventually slow,” Jeff Papp, a Lisle, Illinois-based senior
analyst at Oberweis Asset Management Inc., which oversees $700
million in assets and owns shares of Qihoo, said in an e-mailed
message yesterday. “There are very high expectations for growth
built in.”

ETF Declines

The iShares China Large-Cap ETF, the nation’s biggest U.S.-
listed exchange-traded fund, dropped 2 percent to $39.17, the
most since Oct. 23. The Standard & Poor’s 500 Index retreated
0.1 percent after a report showed that pending home sales in the
U.S. unexpectedly fell.

Qihoo’s revenue will increase 55 percent to $1.01 billion
in 2014, the smallest on record, according to the mean estimate
of 19 analysts compiled by Bloomberg.

The company boosted its web search market share to more
than 23 percent as of Nov. 24 from 11 percent at the beginning
of the year, Stifel said, citing third-party data provider CNZZ.
Baidu Inc., owner of China’s most popular Internet search
engine, has 60 percent stake in the search market, it said.

‘Many Competitors’

“The problem is this company has too many competitors,”
Henry Guo, an analyst at ABR Investment Strategy LLC, said by
phone yesterday from San Francisco. “In desktop search, they
have Baidu and on mobile they have Tencent.”

Southern Airlines, Asia’s biggest carrier by passengers,
led a decline of airline stocks in New York, dropping 5.2
percent to $20.75, the most since June. China Eastern Airlines
Corp., the nation’s third-biggest carrier by sales, plunged 5.1
percent to $20.10, the biggest slump since April 15.

The stocks had rallied in the prior three days on
speculation the air force will issue new airspace management
rules at the end of the year. The government currently allots
only 20 percent of airspace to civil aviation.

Ten-day volatility on Southern Airlines jumped 22 percent
to 66.95 yesterday, the most since April 17. The metric surged
18 percent to 70.71 for Eastern Airlines, also the highest in
seven months.

Giant Gains

Giant advanced 13 percent to $11.41, the most in two years,
after receiving a buyout offer. More than 11 million shares
changed hands, nine times the average of the last 90 days.

A consortium led by Giant’s Chairman Yuzhu Shi and Baring
Private Equity Asia offered to purchase Giant at $11.75 per
American depositary receipt, a 3 percent premium to yesterday’s
close. The consortium owned about 47 percent of the company’s
shares as of Nov. 25.

The Shanghai Composite Index of domestic shares declined
0.5 percent to 2,186.12, the third day of losses. The Hang Seng
China Enterprises Index in Hong Kong lost 0.5 percent to
11,387.21.